Labor Costs Ease as Wage, Benefit Increases Slow

Labor expenses for U.S. businesses rose at a slower pace in the second quarter as job cuts, the plunge in manufacturing and a slowdown in the rest of the economy restrained wages and benefits, the government said Thursday.

A separate report from the Commerce Department showed the economy is still struggling. Orders for durable goods in June fell 2%, twice as much as expected by analysts and evidence that manufacturing remains mired in a slump.

The Labor Department reported that the employment cost index, which measures company labor expenses, rose 0.9% after increasing 1.1% in the first quarter. The cost of worker benefits rose less than in the first quarter, while salaries and wages increased at the same pace.

Sluggish economic growth and a surge in job cuts this year may limit the rise in labor costs, analysts said. Slowing consumer and business demand has prompted companies to lay off workers and ask others to accept lower pay.

In addition, businesses are in no hurry to hire. An index measuring the volume of help-wanted advertising in major U.S. newspapers fell in June to its lowest level in almost 18 years. The Conference Board’s help-wanted index fell to 58 from a reading of 60 in May.

The Labor Department also reported that first-time claims for state unemployment benefits plunged by 51,000 last week to 366,000. Still, continuing claims held close to the highest level since October 1992, and department officials said the weekly decline in initial claims may reflect difficulty in the government’s adjustment for seasonal layoffs in the automobile industry.

Durable-goods orders fell in June as demand weakened for computers, autos and aircraft. Excluding transportation equipment, orders dropped 1.5%. Computers and electronics orders fell 3.2%.

Labor costs were 3.9% higher at the end of June than in the same month last year. That’s the smallest year-over-year increase since the period ended in December 1999. Labor costs account for about two-thirds of the costs of goods and services.

Wages and salaries, which make up almost three-fourths of the employment cost index, rose 1%, matching the first-quarter increase.

The cost of benefits, such as health insurance, vacations and the employer-paid portion of Social Security taxes, rose 1% after rising 1.3% in the first quarter.

Manufacturers cut 347,000 workers in the second quarter while retail trade, finance, insurance and real estate jobs increased by 113,000, according to Labor Department data.